Little fuss has been made about the Democratic presidential
candidates’ views on higher education spending. The Higher
Education and Lifetime Learning Act — proposed last year by
Democrats Evan Bayh and Rahm Emanuel and now mired in Congressional
committees with other pieces of political profligacy — is a
helpful harbinger of their agenda.
Under the Act, an additional $1,000 tax break would be given to
college students. Clinton and Obama strongly support these
measures, even though the federal government already spends around
$68 billion on education every year (more than inheritance and gift
taxes put together), including close to $20 billion on
post-secondary education.
Education is a “motherhood” area, like health, where sensible
analysis is difficult and moral outrage is easy. After all, who
doesn’t want our kids to get a good education?
But whether policies affect inquisitive “youth” or endearing
children, public spending requires sober analysis. Such analysis,
however, is generally not to the liking of the
indiscriminately-caring, who like to foist the cost of their pet
projects on others.
In fact, economic arguments for additional education spending
are hard to make. Rather, a total withdrawal of federal subsidies
and a tax on college students may be the best way forward.
THE OLD ARGUMENT for spending public money on education goes back
to Adam Smith, who noted in 1776 that “the state derives no
inconsiderable advantage from educating the common people.” Left to
their own devices, people would not get enough schooling. Even
Milton Friedman conceded that in a “stable and democratic society
… a minimum degree of literacy and knowledge” might leave a role
for government.
A literate, numerate, and civic-minded population will yield a
public dividend of lower crime rates, enhanced democratic
participation, and higher labor productivity. Indeed, since Smith’s
time state subsidy and compulsion of education has helped pull the
vast bulk of society from inert ignorance to 99 percent literacy in
the U.S. today, up from around 50 percent at Independence.
However, private incentives to read and write have strengthened
considerably since mandatory education was imposed in the U.S. in
the mid-19th century, even among the poor. Back then, the state
interfered with poor parents’ desire to send their skinny children
to work. Today it is difficult to succeed at the supermarket, let
alone find a job, without basic literacy.
I doubt whether all today’s “poor” parents would avoid educating
their obese children if government did not insist, especially if
income taxes extracted from the working classes were cut by an
amount equal to total federal and state education spending, about
$600 billion, or $13,000 annually for each of the poorest 40
percent of U.S. households — child or no child.
Nevertheless, for children of the very poor or very careless,
state compulsion and provision of basic education remains necessary
even today, if only to ensure the truly brilliant among us are not
hampered by an unfortunate birth. Smith’s and Friedman’s arguments
carry weight for primary and secondary education.
BUT DOES THE OLD public benefit argument apply equally to college
education? In my experience, university students fall into two
broad camps, the studious and the typical. The former go to
increase their own earning potential and study diligently, often in
vocational fields like law, medicine, engineering, or accounting.
They don’t need any subsidy. The latter go to enjoy themselves and
delay finding a job, often stumbling through alcohol-fueled
semesters in search of the next party or conquest, and reading the
occasional book on the side.
Maybe the studious deserve a subsidy for their determined
efforts and higher future tax payments. But frankly, where is the
public benefit of middle and upper-class children writing their
desultory, unoriginal thoughts down twice a term, and drinking
themselves silly for four years (and let’s not kid ourselves about
the demographic whose children make up the bulk of typical college
enrollments)? The only public dividend these students provide flows
directly from alcohol and nightclub companies to private
stockholders. Yet public money is poured into the education and
maintenance of both.
But this analysis surely neglects the intangible benefits of a
less vocational college experience. After all, college years offer
the chance to become self-aware, to experience diversity and
engage, to be empowered, and learn how to use a library. Can we
value these benefits?
It’s difficult, but we can easily value the costs. Having the
equivalent of Australia’s entire labor force, around 11 million
American adults, idle on college campuses around the country,
“studying” subjects of dubious vocational merit at public expense,
results in significant waste.
The U.S.’s 146 million-strong labor force generates almost
$8 trillion of income every year. We could
theoretically increase U.S. annual income by up to $600 billion
dollars (Australia’s approximate annual income) by transferring
idle college students into the workforce.
To be fair, this is illustrative and extreme; only about 60 per
cent of bachelors degrees and half of masters degrees are
vocationally useless. You might find this lenient, and I
encourage you to visit Tables 254 and 255 of the Department of Education’s
annual Digest of Education Statistics and construct your
own proportions.
Of course, college attendance entails not only lost income, but
forgone tax revenue. If six million full-time U.S. students were
working rather than studying, on $40,000 a year income and a total
average tax rate of 30 percent, U.S. governments would gather an
extra $72 billion a year in tax in the short-run, enough to fund
the entire Departments of Justice, the Interior, Commerce, and
Energy.
Reasonable people can quibble with my exact figures, but not the
general message: Having an enormous full-time college population
has significant economic costs in terms of forgone national income
and tax revenue, in fact far greater than the accounting cost of
subsidizing the costly pursuits in the first place.
ACADEMIC TRADITIONALISTS might take issue with my apparent disdain
for non-vocational fields, such as classics, history and
philosophy. But far from heralding their demise, a withdrawal of
public subsidies would reduce enrollment in these fields, leaving
only the keen and bright. Academic standards would recover, and
their pejorative, public dismissal as “soft-options” would
fade.
Of more concern is the rapid growth of trendy,
inherently useless fields, for which a cut in subsidies
may prove fatal. The fastest growing majors for both bachelors and
masters degrees are gender studies, communication studies, visual
and performing arts, and fitness studies, all up by around 25
percent since 2000.
Is it fair to question whether some disciplines are more
deserving of public money? Well, let’s take gender studies. Recent
publications in the field include “Negotiating Anal Intercourse in
Inter-Racial Gay Relationships in Hong Kong,” and “Beyond the
Vagina-Clitoris Debate — from Naming the Genitals to Reclaiming
the Woman’s Body,” appearing respectively, for your reference, in
scholarly journals Sexualities and Women’s Studies
International Forum. Hardly topics to be sniffed at, and
doubtless deserving of funding, but public funding?
In others words, should we use the coercive powers of the state
to take individuals’ property to fund research into
location-specific intercourse, of any sort, or to deconstruct the
apparently raging vagina-clitoris debate? One might also question
the utility of fitness studies, whose popularity has been matched
by obesity itself.
SO WHY, THEN, if much college education is useless, do so many
still attend? Including masters and PhD students, close to 18
million students attend college in the U.S., and their numbers have
grown at twice the rate of the U.S. population since 1970.
Such a rapid increase should surely have initiated a labor
productivity revolution, yet nothing of the sort has emerged. On
the contrary, U.S. productivity growth slowed dramatically in the
1970s, before resuming normal levels in the 1990s. In fact, top
Yale economist William Nordhaus has
observed that productivity growth was no faster after 1995 than
before 1973.
Economics Nobel-prize winner Michael Spence suggested an
explanation for growing enrollment in 1974: A person goes to
college to send a signal to employers that she is smarter than
someone who didn’t go, even if she doesn’t actually learn anything
vocationally relevant. But now that everyone is trying to signal,
we are back to square one, except with millions of people
pointlessly hanging-around on campus for four years before doing
anything productive. Highly intelligent or dedicated students can
end up hanging around for a good ten years, doing degree after
degree just to make a point.
If this process results in janitors requiring masters degrees in
cleaning technology, the educational race to the top will have
become a serious problem. To avoid this, government should withdraw
subsides completely from college courses that do not add productive
value to the economy. Cultural Studies professors would not be
thrilled: Foucault’s witty musings on sexual identity would not get
the same subsidy as the general principals of accounting and
engineering, for instance. But these are the hard decisions we
elect politicians to make.
In time, government could scale back higher education subsidies
altogether. If time spent at college continues to spiral out of
control, a lump-sum tax on college students of a few thousands
dollars might be warranted. Brilliant and dedicated students from
all backgrounds, in whatever discipline, would still percolate to
the top of the academic tree owing to elite public and private
scholarships, but the labor force, national income, and tax
revenues would expand.
A tax on students may well prove too provocative, yet platitudes
that colleges and their students are under-funded should get short
shrift. A college education is a fine ideal, imparting both
vocational and abstract benefits, but the costs should be borne
privately.
Adam Smith wrote that “the more [people] are instructed the
less liable they are to the delusions of superstition, which, among
ignorant nations, frequently occasion the most dreadful disorders.”
But wait did Adam Smith have a PhD? Actually, he didn’t, so perhaps
he’s not qualified to comment… One of our contemporary
superstitions is that blank checks from the public to colleges and
their students are productive and justified.
Adam Creighton is a Commonwealth Scholar at Balliol
College, Oxford, and in 2007 was a summer research fellow at the
Tax Foundation, Washington D.C.
